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Why Child Endowment Plans?

Education is the only way to ensure your child a bright future. Quality education costs money .This is where you need a child endowment plan.In this article you will learn how child endowment plans helps your child get the money needed for a good education.

What are child endowment plans?

A child endowment plan works in the same way as an endowment plan A child endowment plan has twin benefits - Insurance + Savings The child endowment plan can be taken by you (parent), your spouse or even your parents (child’s grandparents). You (parent) become the proposer of the child endowment plan. The child endowment plan is taken on your (proposers) life. You (proposer) are the life assured under the policy. If you (life assured) die your children get a lump sum for their education. You (life assured) pay the premiums half yearly (once in 6 months), quarterly (once in 3 months) or monthly depending on the policy. You choose a sum assured depending on the premium you pay. The child endowment plan has a maturity period (when your child is 18-25 years) .The premiums are paid for a particular time period or until the maturity of the plan. On maturity of the policy you get a lump sum (sum assured + bonus) which you use for your child’s education. You get a bonus only if you opt for a child endowment with-profits plan.

How do child endowment plans work?

The child endowment plans in India come with a waiver of premium rider. Riders are additional benefits for a higher premium.You must take child endowment plans with a waiver of premium rider. You have to pay the premiums in a child endowment plan until the maturity of the plan or for a fixed period.On maturity you get Sum assured If you (life assured) die before the maturity of the plan the child endowment plan pays your child (or his guardian) the death benefits. (Sum assured)What makes a child endowment plan with a waiver of premium rider unique is on your (life assured) death, all future premiums are paid by the Insurer (Life Insurance Company).On maturity of the plan (when your child is 18-25 years of age) the child gets a maturity amount (lump sum paid on the maturity of the policy).

The child endowment policy makes payments twice :

  • On your (life assured) death.
  • On the maturity of the policy.

What are the features of child endowment plans?

Child endowment plans

The child endowment plan has a minimum sum assured of INR 1-1.5 Lakhs. The maximum upper limit could be INR 1-5 Crores with some plans having no upper limit.

What should be the age of your child when you (life assured) invest in a child endowment plan?

The minimum age you (life assured) can invest in a child endowment plan is when your child is 1-90 days. The maximum age you (life assured) can invest in a child endowment plan is when your child is 12 years. The child endowment plan matures when the child is 18-25 years of age depending on when you invest in the policy.

At what age can you (life assured) invest in child endowment plans?

You (life assured) can invest in the child endowment plan when you are 18-20 years (minimum age you can enter this plan). The maximum age you (life assured) can invest in a child endowment plan is when you are 50-60 years. Your maximum age at the maturity of the policy is 65-70 years.

What are the premiums you can pay in child endowment plans?

Child endowment plans

Premium of the policy (INR) Sum assured (INR) Term of the policy (Years) Term you have to pay premium (Years)
75000-150000 10 Lakhs 25 20-25
150000-250000 25 Lakhs 20 18-20
400000-600000 50 Lakhs 25 20-25

What are the tax benefits you get from child endowment plans?

You get a deduction under Section 80C of the income tax act up to INR 1.5 Lakhs per year on your taxable salary for the premiums you pay for the child endowment plan. The maturity amount you get when the policy matures or the death benefit your family gets on your (life assured) death are tax free under Section 10(10d) of the income tax act. You have learnt from this article how child endowment plans work and you can invest in this plan to provide a good education for your children and also for their marriage expenses.So why child endowment plans? You know the answer.

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